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Irwin M. Latner, partner in the firm’s Corporate Securities Practice Group, was interviewed by Opalesque in “Hedge Fund Advertising Demystified.” In part one of this Q&A series, Mr. Latner discusses the areas of confusion with regards to hedge fund advertising and their consequences. In part two of the series, he discusses press interviews, state laws, possible future SEC rules, the flexibility of Rule 506(c), and alternative means of advertising.

Opalesque: Please tell us about the different areas of confusion with regards to hedge fund advertising.

Irwin Latner: The JOBS Act was passed in 2012 and to date, according to published reports, not very many private fund managers have taken advantage of the new advertising authority under Rule 506(c). In particular smaller managers have not utilized it in spite of the apparent benefits of increasing branding and exposure potentially growing AUM.

There are several reasons for this, one of which was the lack of harmony between the JOBS Act’s authority to use advertising and the exemption from registering as a Commodity Pool Operator with the CFTC where the manager engages in a de minimis amount of futures’ trading.

Up until recently, that de minimis exemption from CFTC registration was conditioned on not advertising to the public. But a few months ago, the CFTC amended its rule and harmonized its exemption with the SEC’s rules under the JOBS Act.

That was one source of potential risk and uncertainty that existed up until a few months ago, but now that has been rectified.

The other area of confusion may be with respect to what the actual requirements are in order to engage in advertising under the JOBS Act. Except with respect to JOBS Act offerings, the prohibition against general advertising is a condition in the US for a fund offering to be eligible for exemption from SEC registration under the Regulation D private placement rules.